The company's chief executive Hussein Dabnoun said the airline wants planes from both Airbus and its American rival Boeing which are still locked in a long running dispute over state aid for new aircraft development.

Signing a deal with the Libyan airline will extend Airbus' current customer base and profile in the Arab world and provide additional work for aerospace workers who make the wings for the company's airliners in Flintshire.

Officials of Libyan Arab Airlines said the company has an ambitious plan to renew and upgrade its fleet as the country opens up to the West after the United States lifted most of its sanctions against the energy-rich North African state.

Both Airbus and Boeing are likely to offer competitive cut-price rates for their new aircraft and seek to boost revenues in succeeding years with lucrative maintenance contracts with the airline.

Confirming that, Mr Dabnoun said: "Libya's policy on buying the new planes focuses on accompanying the purchase of the jets with a deal over maintenance, spare parts and training pilots."

Although Libya has not yet made a decision on which jets to buy it is believed to want models including the Airbus 330 and Boeing 777.

Meanwhile a European Commission memo says both Boeing and Airbus would probably see their state aid ruled illegal under global subsidy rules should the US press ahead with a complaint at the Geneva- based World Trade Organisation.

The memo says it is possible a WTO panel would rule both planemakers received WTO-incompatible subsidies.

Chicago-based Boeing is pushing the US to file the largest-ever case at the WTO and says European government loans helped Airbus pass it as the world's largest plane maker last year. Airbus counters that defence contracts, as well as foreign and domestic support, all amount to aid for Boeing's new 7E7 Dreamliner that is double what was available for the new Airbus A380 superjumbo.

Incoming EU trade commissioner Peter Mandelson has said that if Washington makes good on threats to take the case to the WTO he is certain the EU would prevail.

He said: "I'm very confident indeed of the EU's position and of the counter case we will be able to bring."